Net Worth Update: +0.8% (February 2017)

When I first started this blog a decade ago, I would write regular net worth updates. A lot of anonymous bloggers did it. I shouldn’t use past tense as there are still hundreds who still do it. However, many of the people who I followed back then don’t do it any more for a variety of reasons.

I stopped too. (I’ll explain why in a bit.)

As you can tell from the title, I’ve had a change of heart of late. Why?

Tracking your net worth is important

Last night I went to my kids’ school’s parents conference. The headmaster had some interesting things to say about education about nowadays. One of them that stuck with me is that the students can get more information from a computer than a teacher. This is leading towards more “student-centric” learning vs. “teacher-centric” learning. There are pros and cons to each, but students who are motivated to learn can get more out of “student-centric” learning.

It seems much of the focus on education nowadays (at least in theory and what they are pushing at my school) is on motivating students. Of course motivation has always been important…

… but motivation is more important than ever.

There are very few things more motivating than tracking your net worth over time. Once you start automating your finances, your net worth grows and you don’t even need to do anything. We max out our retirement accounts (pay ourselves first). Our investment properties (after years of losses due to buying at the wrong time) are paying off significant principle. We have to pay money to keep the properties renovated, but the mortgage is going down each month and the property values tend to go up (sometimes a little each month… sometimes a lot).

In short… do a few simple things over time and you’ll see great results. If you see great results they will snowball.

The best way to keep track of your net worth is Personal Capital. It’s free! I have soooo many brokerage accounts (TD Ameritrade, USAA, and Fidelity to name a few) and even more bank accounts than that. My wife has a few different accounts and we have mortgages all over the place from our investment properties. Personal Capital keeps everything in one place and it uses bank-level security. Did I mention it is free?

1. Comparisons aren’t always helpful. We live different lives. Mrs. Our Next Life doesn’t have kids and we have two. We have different jobs that earn different amounts of money. It’s like comparing a score in King Kong to a score in Pac-Man. It’s not even apples and oranges.

2. I’m not really anonymous. The engine that makes sharing financial work is anonymity. No one wants their long lost cousin calling them up asking for loans.

3. Lawsuits and such. In helping consumers protect their money, I expose scams. Companies scamming people don’t like that. They use the money they’ve scammed out of consumers to hire lawyers to sue me using “alternative facts” to say that I defamed them. One of those alternative facts is trying to argue that my motive to help consumers is to make money damaging other companies. That’s obviously not true, and I don’t think I’m ever the first person to label these scammers as scams.

4. My net worth numbers aren’t always accurate. For years, I included my net worth, because those were the numbers I had. Then I got married and we’ve slowly merged our financial lives over the last 10 years. There are still a few accounts of my wife’s that I don’t have access to. For example, I can’t sign into her government TSP account to get an exact number. Some months, she does give me exact numbers. Other months, she’s busy so I just estimate the numbers as best I can. It’s good enough for my purposes, but not perfect like many other bloggers who track things down to the penny.

February 2017’s Net Worth

Our net worth went up 0.8% in January. That’s nearly a 10% pace for the year. I’d love to that was due to some hard work, but it was simply what it is every month, real estate and stock markets doing their thing.

We would have had a bigger gain, but we had a tenant move out which lead to some renovations. I also haven’t made much money with the blog as I’m still in the middle of redesigning the site. Also January is typically a slow month for the dog sitting business. And this January was no exception. February’s dog sitting income is already nearly double all of January.

Some bloggers track all their earnings and expenses down to the dollar. I’ve never been a fan of such vigorous budgeting. I use the the third budgeting system, which is just to focus on not overspending.

Ask the Readers: Is this Helpful?

Assume for a bit that I had a more eventful month and/or covered it in greater detail. Imagine that I had a nice graph. Is it useful to read that my income was up 0.8% in January when you don’t have the exact numbers?

I understand the reasoning for not sharing actual numbers, but if you are tracking your net-worth based on current market swings the percent changes in the short term (monthly) are not very informative to me as a reader. My wife and I ran across a similar issue with our own finances. I give her a short finances update every month, but as our investments become a larger portion of our net-worth we often see large swings in our net-worth from month to month. These swings are driven almost entirely on the stock market and not by our savings/spending. We found that focusing on our net-worth monthly don’t really help inform our decisions.

I think finding a short term monthly metric that is more dependent on your savings/spending would be more helpful. Maybe percent change in income along with % in net-worth. In our case we decided to track how much we saved/invested each month as a short-term surrogate metric for our long term net-worth growth. We still track our monthly net-worth, but don’t put much focus on it.

This is great feedback. I follow Root of Good and you can see his income change tens of thousands a months depending on the markets. Ours is the same (as are many people’s of a certain wealth).

I was thinking about doing saving/spending, but even that has its challenges. My lack of tracking spending is one problem… though one I could solve. However, our spending is going to be very similar each month and driven largely by mortgage, day care (two kids), and car bills (two new cars). That’s roughly $6000 a month, so the variable parts aren’t going to be significant percentage-wise. I guess I could break them out by category, so that restaurant costs would stand out more.

Even though it doesn’t make much sense, I’m putting more focus on our net worth… simply because the markets have been good and it is very motivating.

I do not share specific numbers either. I do not want random strangers to know so much about me, when I do not really know what their intents are.

But I do know that people prefer to look at the numbers, rather than percentages. So I think that your story would sound better if you state “my networth is now 1,008,000, up $8,000 from the last months update of $1,000,000”, rather than my net worth rose by 0.80%.

I used to write posts before on how my dividend income covers 50%, or 67% or 80% of my expenses, and I think people ignored them. Readers love dollar signs, not percentages. When I once wrote down about the specific income in dollar terms, people loved it ( though I got a lot of “feedback” telling me my income needs that I have lived on over the past decade are somehow too low)

I have heard from others that sharing specific numbers in net worth posts makes them more authentic. And somehow, people trust them more or some reason. Though there is downside to that as well – do not piss off any more MLM companies ;-)

I’m not a big fan of reviewing other bloggers net worth. However if it was my thing I think you need more then a percent, it really doesn’t tell you much in context. Is .8. good? How does it align with your end goals?

I share the cash flow monthly, but usually not the net worth. I think cash flow is very useful because readers can see what real life income and expense looks like. Net worth is nice to see too, but maybe just once per year or something like that. Not sharing is perfectly fine too. We went up about 1% as well. I like it!

I’m thinking of keeping a YTD of net worth rather than a month-by-month. I don’t track expenses which makes cash-flow difficult, but I think I’ve got a solution in just tracking the income. It’s not too much different than what you do actually.

Over the last many months, we’ve been adding 1% a month to our net worth. This is crazy given that our expenditures went up 20% year to year after I “closed the books” for 2016. Don’t know how it’s happening but I’m not complaining. That said, no, I’m not happy at all that outgo is 20% higher, but we blame taxes, health costs and property management costs for some of it (surprisingly, the travel budget was flat and the increase did not come from there).

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